LD 835 would raise more than $55 million per year in revenue for the General Fund and affect only about 2% of Maine’s taxpayers—the very highest-income households— according to analysis from the Institute on Taxation and Economic Policy.
Good Afternoon Senator McCormick, Representative Goode, and members of Joint Standing Committee on Taxation. I’m Joel Johnson, an economist working at the Maine Center for Economic Policy. I’m here today to testify in support of legislation that would improve the progressivity of Maine’s personal income tax and the fairness of Maine’s overall tax system.
LD 835 would raise more than $55 million per year in revenue for the General Fund and affect only about 2% of Maine’s taxpayers—the very highest-income households— according to analysis from the Institute on Taxation and Economic Policy.
Classical economists from Adam Smith to Alfred Marshall have argued that taxes should be progressive: that the wealthiest citizens should pay a larger share of their income in taxes than the middle class, and the middle class should pay a larger share of their income in taxes than the poorest. Empirical research supports this idea, showing that progressive tax systems are linked to greater economic mobility and economic opportunity for low-income residents.
Maine’s overall state and local tax system is not progressive. Maine’s highest-income households actually pay a smaller share of the income in state and local taxes than do most other Mainers. According to the Institute on Taxation and Economic Policy, the top 1% of Maine’s nonelderly taxpayers will pay approximately 7.5% of their income in state and local taxes in 2015, while taxpayers in the bottom 95% will pay at least 9% of their income in taxes.
Recent changes to Maine’s tax system have made our overall state and local tax system more favorable to high-income residents at the expense of low- and moderate-income residents. Major reductions in property tax relief, an estate tax cut, an across-the-board income tax cut, and sales tax increases have made a regressive state and local tax system even more so.
LD 835 would be a step in the right direction: toward a more progressive and more adequate tax code.
Thank you for your consideration and please do not hesitate to contact me with any questions.
